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MICROS Systems Inc. (MCRS - Analyst Report) reported adjusted earnings per share of 58 cents for the fourth quarter of fiscal 2013, which were in line with the Zacks Consensus Estimate.


Although revenues of $328.6 million increased 8.6% year over year, it came marginally below the Zacks Consensus Estimate of $330.0 million. Year-over-year improvement in revenues was primarily attributed to the strong demand across Latin America and Asia Pacific regions.

Segment wise, Service revenues came in at $217.8 million, up 11.0% from $196.3 million in the previous-year quarter. Hardware revenues came in at $74.1 million, increasing 7.4% from the year-ago quarter. However, Software revenues declined 1.4% from the year-ago quarter to $36.7 million.

Operating Results

Reported gross margin was 52.7%, down from 54.7% in the year-ago quarter. The year- over-year decline was due to unfavorable business mix.

Operating expenses increased 25.9% on a year-over-year basis to $118.9 million due to increase in Selling, general and administrative expenses and Research and development expenses. Moreover, as percentage of revenues, operating expenses increased 500 basis points (bps) from the year-ago quarter to 36.2%. This in turn impacted MICROS’ operating performance.

Operating income decreased 23.7% from the year-ago quarter to $54.1 million while margins contracted 690 bps to 16.5%.

On a GAAP basis, net income came in at $42.0 million or 53 cents per share versus $48.2 million or 59 cents in the year-ago quarter. Adjusting one-time items and including stock-based compensation expenses, net income came in at $45.6 million or 58 cents.

Balance Sheet

MICROS ended the quarter with cash and cash equivalents and short-term investments of $634.1 million versus $669.3 million at the end of the previous quarter. The company did not have any long-term debt on its balance sheet.

Share Repurchase

The company spent around $85.7 million to buy back 2 million shares for an average price of $42.86 per share.


MICROS has projected its fiscal 2014 revenue guidance in the range of $1.295 billion to $1.320 billion, while the non-GAAP earnings per share is expected to hover in the range of $2.46 to $2.50.

Our Take

MICROS’ fourth-quarter results were modest with in-line earnings per share and revenues increasing on a year-over-year basis. The company is expected to take care of its margin position and control expenses. The revenue guidance for fiscal 2014 is at a decent range which projects some improvement in business.

Although MICROS has a decent cash position and is providing valuable solutions to Apple Inc.’s (AAPL - Analyst Report) iPad, we remain concerned due to increasing competition from innovative (tablet-based) Point-of-Sales (POS) solutions by its peers Square, Revel, Groupon Inc. (GRPN - Analyst Report) and NCR Corp. (NCR - Analyst Report). Moreover, the company’s European exposure and a sluggish macro economic environment are the other headwinds, going forward.

Currently, MICROS has a Zacks Rank #4 (Sell).

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